How does my Insurance Policy Work?
Insurance is complicated, but for most owners it is the most cost effective way to get a quality roof. You pay premiums every month. Why not have most, if not all, of your damage paid for by insurance?
Typically the only advantage to having cash bids in this process is if you have no insurance, or an ACV policy that will not allow you to recover the depreciation. In this situation, absolutely compare bids, but be careful. Lots of times, the cheapest bid is the cheapest roof! Make sure you are comparing apples to apples! If you have an ACV policy or no insurance we will gladly bid on your roof!
If you have replacement cost coverage, there is no advantage to getting a lower bid. State law requires you pay your deductible, and in order for insurance to release the depreciation, your contractor has to show a final invoice that equals or exceeds the amount the insurance is willing to pay. If the invoice is under the RCV amount the insurance agrees to pay, your depreciation check is decreased by the same amount. There is just no value to the contractor or to the homeowner in this situation. With replacement cost policies, we work for what the insurance agrees to pay, and we upgrade your roof! Insurance roofs are usually the best roofs because corners are not cut. This is the situation for most homeowners.
So let’s look at the world of Insurane!
Terms to understand!
ACV - Actual Cash Value.
If you have damage on your property the insurance company will compensate you for your loss. The ACV is what your damaged property is worth in its present state and is less than what it will cost to repair your damaged property. This is how your ACV check is calculated and should be enough for your contractor to purchase the supplies for your project.
ACV Check = Replacement Cost Value - Minus Depreciation - Deductible
There is no requirement that you make repairs with your ACV dispersement. You can actually do what ever you want with this money. (unless your mortgage company is on the check and they want all repairs made) But, in order to have your damaged property insured in the future, you must make the repairs itemized in your scope of loss. To become covered again you have to fix it.
It makes sense right? In order to have your property insured in the future you must repair the damage identified. No insurance company is going to insure an item that they paid for and you did not fix. So how are insurance companies protecting themselves and making sure the money they pay is actually being used for the intended purpose? Okay. Here we go. It is complicated!
Remember the days when you could collect an insurance check, hire a roofer to do it for less, and pocket the extra! Well, so do insurance companies and they are working hard to make sure this does not happen. They have actually worked with mortgage companies and the Texas legislature to make it illegal for a contractor to assist a homeowner in paying their deductible. So how are they doing this?
House Bill 2102 was passed in 2019 in Texas.
This law makes it illegal for a contractor to help or assist a homeowner pay their deductible. It is a misdemeanor punishible by 6 months in jail or a $2000 fine. Both the contractor and the homeowner can be held accountable for this new Law. This is how insurance companies proceed in our new normal. So here are some terms you need to understand.
RCV - Replacement Cost Vaue
This is the fair market value that it will cost you to make the repairs your insurance adjuster has itemized in your scope of loss. So your deductible plus what the insurance is willing to pay equals the RCV. This is how much you should expect to pay for your repairs.
Deductible
This is your responsibility. House Bill 2102 requires that you pay this if you want the insurance to pay for the repairs. Yes it is legal to use ACV money for non-roof property to pay your deductible. Just understand if you were to use money for gutters or staining a fence, as an example, to pay for your deductible, you now have gutters and/or a stained fence on your property that are uninsurable until those repairs are made. But if you are okay with cosmetic damage that you have been compensated for, this is a way to help with the deductible if money is tight. Most policies give you up to two years to make repairs. You can do those things later. Or you can sign up for our awesome after pay program. Zero interest and up to 100 payments. We will give you free money that you can make up to 100 payments. So a $3500 deductible can be paid by paying only $35 a month. If interested click here!
Non Recoverable Depreciation
This is becoming more and more common. Some companies are putting things like roofs and fences on a depreciation schedule, and the policy stipulates that you can not recover this depreciation. Some policies that have Replacement Cost Coverage have exclusions such as fences, metals, and even the roof. When you get your homeowners insurance policy, make sure you understand what is not covered. Remember, it is not the roofers fault if your insurance company doesn’t pay for the entire cost of the repairs. You are the one that signed the policy, and those provisions likely saved you a lot of money on the front end.
Recoverable Depreciation
If you have Replacement Cost Coveragle on you policy, the insurance company will pay for the difference between this is e actual cost Value and the cost to make repairs. This is your Depreciation Check. In order for the insurance to release this check, your contractor will have to show proof that 1) the deductible has been paid 2) the repairs have been made (photos), and 3) a final invoice that is equal or greater than the RCV value determined by your adjuster. IF the roofer agrees to discount your roof, the insurance company in turn will reduce the amount of your Depreciation check. If the roof is discounted and the insurance is not notified, that is unfortunately insurance fraud.
Supplements
IF the contractor and the insurance company do not agree on compensation, the contractor can highlight missing items and ask for such items to be included in the estimate. If the insurance company agrees to the missing items, they will adjust their scope of loss and send the homeowner a supplement check to account for the new approved damages. Supplements typically happen one to two times, but could be more. Usually if a contractor finds a mistake in the scope, that will be caught BEFORE repairs are made. and sometimes when we pull up the shingles we find stuff that needs to be repaired. Sometimes that includes multiple layers of felt or deck repairs. If you have a provision in your policy for code upgrades, sometimes we find your decking is not to code. in those instances we may be able to get the insurance to pay for new decking. 7/16 OSB is our decking of choice.